“The Oklahoma Supreme Court must abide by the Federal Arbitration Act, which is the ‘Supreme Law of the Land.’” —Per Curiam 

Facts: Eddie Howard and Shane D. Schneider worked as employees of Nitro-Lift Technologies, L.L.C. Nitro-Lift provides services to oil and gas well operators to enhance their products. Howard and Schneider entered into a noncompetition agreement with Nitro-Lift whereby they agreed that they would not work for a competitor of NitroLift’s for a stated period of time after they left Nitro-Lift’s employment. The agreement contained an arbitration clause wherein the parties agreed to submit any contract dispute to arbitration. When Howard and Schneider quit and began working for Nitro-Lift’s competitors, Nitro-Lift served the two men with a demand for arbitration to enforce the noncompetition agreement. Howard and Schneider filed a lawsuit in Oklahoma state court asking the court to declare the noncompetition agreement null and void. The Oklahoma trial court dismissed the plaintiffs’ complaint and ordered arbitration. The Oklahoma supreme court held that the state court, and not an arbitrator, should hear and decide the dispute. The Oklahoma court held that the noncompetition agreements were null and void. Defendant Nitro-Lift appealed to the U.S. Supreme Court. 

Issue: Is the contract dispute between the parties subject to arbitration? 

Language of the U.S. Supreme Court: State courts rather than federal courts are most frequently called upon to apply the Federal Arbitration Act (FAA), including the Act’s national policy favoring arbitration. By declaring the noncompetition agreements in two employment contracts null and void, rather than leaving that determination to the arbitrator in the first instance, the state court ignored a basic tenet of the Act’s substantive arbitration law. The Oklahoma Supreme Court must abide by the FAA, which is “the Supreme Law of the Land.” 

Decision: The U.S. Supreme Court held that the contract dispute in the case was to be heard by the arbitrator and not by the Oklahoma state court. The U.S. Supreme Court vacated the decision of the Oklahoma supreme court. 

Ethics Questions: Why do companies place arbitration clauses in their employment contracts? Why did the plaintiffs want their case heard in state court?